A taxpayer becomes eligible for refund when total tax paid (TDS, Advance Tax) by him/her is greater than his/her tax liability for a particular financial year. In the following instances, the taxpayer becomes eligible to claim tax refund:
- When the advance tax paid on estimated income is higher than the actual tax liability of a taxpayer.
- If tax deducted at source (TDS) from salary, interest, professional or other incomes is higher than the tax payable on regular assessment.
- When self-assessment tax paid is in excess of actual tax liability.
- When an income is charged in India and in a foreign country. (with whom the Indian government has an agreement to avoid double taxation).
How to claim Income Tax Refund?
A few basic things to keep in mind if you want to claim a refund.
- Don’t forget to submit Form-12BB Investment Declaration to your employer
- Form-12BB contains details about HRA, Leave Travel Allowance, and other section 80 tax deductions.
- Your employer will calculate accurate TDS based on your Form-12BB and you will save yourself from excess TDS.
- Entered all the deductions in your income tax return.
- If you don’t enter deduction details in tax return then your tax liability will be higher than the TDS deducted by an employer.
- You will end up paying tax which you are not liable to.
- File an income tax return to claim a refund.
- If you do not file an income tax return then all your tax credits including TDS and advance/self-assessment taxes will go in vain.
- Income Tax Department will not automatically pay you the refund just because you have paid taxes.
- Declare all the incomes and deductions in ITR to show that your taxes paid are greater than the actual tax assessed.
Once you have filed your income tax return, you need to wait for assessment from the Income Tax Department. Here what you need to do:
- You will receive an intimation u/s 143(1) once the return is processed.
- It will contain a comparison of income and tax calculation as per your tax return and as per Department.
- Refund is confirmed if the refund amount as per ITR and Intimation is same.
- When there is a discrepancy you need to check the calculations for reasons of mismatch.
- If there is any calculation error then you can rectify your return u/s 154(1)
Your may not be getting refund for one of the following reasons:
1. You may not have filed an income tax return for the relevant assessment year
2. Your taxes paid matches your total tax liability for a relevant assessment year
3. You might have forgotten to claim taxes paid on your return
4. You might have furnished incorrect bank account details in your return
No, refund received by a taxpayer is not taxable. But any interest received on the refund is taxable in the year in which refund is received by a taxpayer.
Usually, it takes 3 to 6 weeks to receive a refund from the date of filing of a tax return. IT Department is planning on processing refund faster in coming years.